The present invention relates to the field of Automated Teller Machines and, more particularly, to loyalty point conversions, and more specifically to conversion of loyalty program points to commerce partner points per terms of a mutual agreement.
Merchants have used loyalty rewards programs for many years to create and maintain customer loyalty and increase the perceived value of their goods and services. However, the perceived value of the loyalty program rewards points is diminished by the limited redemption options available to the loyalty program member that the reward points granting entity provide.
Loyalty point exchange systems emerged that allow members of different loyalty programs to exchange rewards points in one loyalty program for loyalty points in another. The exchange systems did not operate loyalty points programs of their own, but acted as proxies for a number of third party loyalty program operators. In these exchange systems, no loyalty program operator had any agreement with any other loyalty program operator. Instead, each loyalty program operator unilaterally established a “buy rate” and “sell rate,” which the exchange system relied upon. POINTS.COM is an example of such an exchange system that necessarily suffers from a low conversion rate and a continuous loss of value, as each transaction is an open market transaction. Open market transactions impede an ability of a loyalty program operator to shape future consumer behavior, which is a value of running the loyalty program achieved by the loyalty program operator. In other words, open market transactions turn otherwise negotiable units of value (loyalty points) into a fungible unit of value, thereby circumventing loyalty operator established restrictions, conditions, and constraints intentionally implemented for member behavior shaping purposes. Traditionally, exchange centers (like POINTS.COM) have not recognized pitfalls of turning non-negotiable units of value (loyalty points) into fungible units of exchange, which is addressed herein in a novel manner.
That is, conventional exchange systems had certain drawbacks inherent in their implementations that are consistent with blindspots present in conventional teachings specific to loyalty points and their transferability. In conventional exchange systems, customer loyalty to a particular merchant was reduced, loyalty program operator's ability to channel customer behavior was diminished, and the centralized loyalty point conversion systems added a middleman charge to every transaction. The inventors of the present disclosure and related patents of the same family realized that by limiting the points conversions by agreement to complementary businesses such as hotels, airlines, and rental car agencies, the agreed parties could offer their loyalty program members the benefits of increased redemption options while still getting the benefit of creating and maintaining customer loyalty that the loyalty programs were intended to provide. Furthermore, customer behavior could be channeled to the benefit of each of the commerce partners who were parties to the agreement, and cross promotions and other marketing programs could enhance each partners business with no detriment to their complementary business partners. Thus, advantages of a specific consumer partner relationship and member exposure to this relationship serves to balance negatives resulting from increased fungibility of loyalty program points, from a program operator perspective.
The value of the synergy created by these agreed loyalty point conversion arrangements was not apparent to loyalty program operators at the time of the filing of the parent patent in the present patent family on May 25, 2006, as evidenced by the lack of any such systems at that time. Today, however, almost all sole source loyalty program operators (operators having strong loyalty program barriers that expressly impose restrictions, conditions, and constraints that limit fungibility of granted loyalty points) in the airline, hotel, rental car agency, credit card, and other industries operate under these kind of mutually beneficial points conversion agreements.
Another attempted solution to granting consumers increased redemption options is to aggregate large sets of retailers into a single rewards program. These aggregated programs, sometimes referred to as networked loyalty programs, have disadvantages in that participating retailers surrender control to a centralized, aggregate program. In these programs, many merchants distribute points originated by the networked program operator that secures or backs the points (thus guaranteeing the value). Within the network loyalty program, network points are fungible across point distributing merchants. In these networked loyalty programs, however, merchants are restricted from shaping behavior of customer to an extent possible with sole source program since incentives present for the program operator (the networked loyalty program operator) are based on increasing merchant and consumer participation to create a “natural monopoly” that reinforces and incentives participants to join the networked program (which the networked loyalty program operator receives fees or profit on a per-transaction basis, justifying the operating costs from the program operator perspective). Thus, merchants do not have their own “program” but are participants in the networked program, which inherently imposes operating constraints on the merchant distributers—as there is a tension between merchant desires/incentives and those of the networked loyalty program operator. In other words, merchants have a hard time restricting redemption options to those minimizing merchant costs and have a challenge shaping consumer behavior using restrictions, conditions, and other constraints (such as redemption constraints, expiration dates that provide point pressure on members, and member-ship requirements specific to the merchant as other merchants are point distributing participants by nature of a networked program) that are inherently/implicitly present in a well-balanced independent loyalty program (such as those typically operated by airlines and hotels). For example, if competitors are permitted to join in the aggregate program (as merchant point distributers), customers of the aggregate program have options within the program for competing goods and services. Loyalty to a specific retailer is compromised.
In the present disclosure, the loyalty points are “non-negotiable” because of the restrictions imposed by the points granting entity become, as a result of the conversion, funds that are independent of the granting entity and its restrictions.